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'It's just not what people want anymore': Subway to close hundreds of US stores

An employee passes an order to a customer at the drive-thru of a Subway Restaurants location in Princeton, Illinois, on April 20, 2017. MUST CREDIT: Bloomberg photo by Daniel Acker.

Subway Restaurants, home of the ubiquitous $5 footlong, plans to shutter hundreds of U.S. stores as consumers lose their appetite for lunch meats.

The world's largest restaurant chain says it will close about 500 of its 26,000 locations nationwide this year. Last year, Subway closed more than 800 U.S. stores.

Subway - which has almost as many U.S. locations as McDonald's and Starbucks combined - is struggling to keep up with growing competition and changing consumer tastes. While its "eat fresh" motto may have won over health-conscious consumers a decade or two ago, analysts say those diners are increasingly looking for things like locally-sourced produce and hormone-free meat, often served up by regional start-ups like Sweetgreen.

Chains like Panera, Au Bon Pain and Firehouse Subs have also eaten up part of Subway's market by offering a range of customizable meals. Meanwhile, fast-food giants like McDonald's, which recently brought back its Dollar Menu, offer cheaper alternatives to Subway's signature subs.

"We aren't eating the way we used to, and luncheon meats are just not what most people are clamoring for," said Bob Phibbs, chief executive of the Retail Doctor, a New York-based consultancy. "Let's face it: If you're in a major metropolitan area, you're looking for that green salad place. You're not saying, 'Let's all go to Subway and order through the sneeze guard.'"

Adding to Subway's woes is a long history of strained relations with its thousands of franchisees, who complain that the company's deep promotions are nibbling away at already-shrinking profits. (All of Subway's 44,000 locations worldwide are independently-owned.) Sales have fallen for at least three years in a row, and foot traffic is down 25 percent since 2012.

"This is a tired company in need of a major brand renovation," said Joel Libava, an independent consultant in franchises. "Walk into any Subway and everything looks exactly the same as it did 25 years ago."

Subway, founded 53 years ago in Bridgeport, Connecticut, as "Pete's Super Submarines," has expanded rapidly in the decades since, opening thousands of new locations in strip centers and suburban shopping malls. It earned a loyal following by pitching itself as a healthy alternative to fatty burgers and fries.

But in recent years, the company's recipe for success has faltered. In 2015, former spokesman Jared Fogle, who rose to fame after losing more than 200 pounds by eating Subway sandwiches, pled guilty to charges of child pornography and child molestation. The company has also struggled to keep customers coming back, as an ever-expanding selection of fast-casual eateries, food trucks, even grocery stores, offer freshly-made meals at competitive prices.

Earlier this year, Subway invested $25 million in a re-branding campaign aimed at boosting sales at its stores. The company's newest ads, meant to appeal to younger consumers, are part of the company's "aggressive revitalization plan," says Don Fertman, Subway's chief development officer.

Subway is focusing on building up its international presence by opening 1,000 stores in countries like India, China, Germany and Mexico. But industry insiders said that while Subway may be able to successfully expand abroad - it is, after all, a well-known American brand - it doesn't have an easy road ahead at home.

"I don't think there's a clear path for Subway," said Phibbs, the retail consultant. "It's just not what people want anymore."

Author information: Abha Bhattarai is a business reporter for The Washington Post.